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Agreement Reached on Icesave

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Agreement Reached on Icesave

November 17, 2008 11:51Updated: January 30, 2014 20:16

An agreement was reached yesterday between Iceland and the European Union member states on compensation for Icesave account holders in the UK and the Netherlands. Iceland has agreed to pay the minimum deposit insurance.

Iceland’s Prime Minister Geir H. Haarde and Minister for Foreign Affairs Ingibjörg Sólrún Gísladóttir presented the agreement to the parliament and the press last night.

Iceland has agreed to comply with the EU Deposit Guarantee Schemes Directive 94/19/EB, which also applies to EEA countries and includes that the Icelandic state guarantees compensation for up to EUR 20,877 (USD 26,423) in each savings account, Fréttabladid reports.

The sale of the assets of Landsbanki, the Icelandic bank to which Icesave belonged and which has now been nationalized, will contribute towards the compensation and the Icelandic state will be responsible for paying the remaining amount.

How high that amount will be depends on how much is obtained from the sale of Landsbanki’s assets. In the worst case scenario, it could be as high as ISK 640 billion (USD 4.7 billion, EUR 3.7 billion).

The sale of Landsbanki’s assets will probably not take place for another one to three years so a solution to all aspects of the Icesave dispute is not yet at hand.

“These accounts will be settled in such a way as to ensure that the nation is able to cope with the burden. The special situation that we have here has been taken into consideration,” explained Prime Minister Haarde, referring to the fact that the nation’s entire banking system has collapsed.

The idea was discussed of British and Dutch authorities granting loans to Iceland allowing Icelandic authorities to repay Icesave account holders in their countries and to allow Iceland to only start paying these loans back after a few years.

Foreign Minister Gísladóttir said the Icesave agreement is a turning point in the reconstruction of the Icelandic economy and the entire society, although there may still be some hindrances along the way.

Gísladóttir said the message that Iceland would not receive loans unless the Icesave dispute was settled had been clear and that Iceland’s request for an emergency loan package led by the International Monetary Fund (IMF) will now be discussed.

The IMF board is scheduled to make a decision on whether or not to grant Iceland a loan on Wednesday. “The Nordic countries will lend us what we need in addition from a loan from the IMF,” Gísladóttir said.

Leaders of the opposition parties have different opinions on the Icesave agreement. “It is more like a resignation or defeat than a solution,” said Steingrímur J. Sigfússon, leader of the Left-Greens, the largest opposition party.

Sigfússon points out that Prime Minister Haarde had once said that Iceland would never agree to what Iceland has now promised to pay and that Iceland would instead seek its legal rights.

“It is just an agreement to make an agreement,” said leader of the Liberal Party Gudjón Arnar Kristjánsson, adding that he has not been informed on what the agreement includes, only that it is now more likely that the IMF will grant Iceland a loan.

“I think reaching an agreement was the only way to go,” said Progressive Party vice-chairman and former Foreign Minister Valgerdur Sverrisdóttir. She criticizes the Independence Party for “believing that they can get away with corresponding with other nations in such away,” however adding that Britain’s behavior cannot be excused.

According to Morgunbladid, the Icesave agreement does not exclude Iceland's right to take the British authorities to court at a future date for invoking their anti-terrorism legislation in order to freeze the assets of Icelandic banks in the UK.